Index of wage and salary earnings rose by 1.8 percent in
April-June

According to preliminary data of Statistics
Finland, the nominal earnings of wage and salary earners rose by
1.8 per cent in April to June 2018 when compared with the
respective period in 2017. Real earnings rose by 0.8 per cent
compared to the second quarter of the previous year, because the
rise in earnings level was faster than that in consumer prices.

According to Statistics Finland’s preliminary data, the
nominal earnings of wage and salary earners rose from April to June
2017 to the corresponding period in 2018 by 1.9 per cent in the
private sector, by 1.6 per cent in the central government sector
and by 1.3 per cent in the local government sector.

Wage and salary earners’ regular earnings increased by
1.8 per cent in April to June

The index for regular earnings describes the permanent change in
earnings better than the index of wage and salary earnings because
it does not take into account performance-based bonuses and
non-recurring items included in collective agreements. Regular
earnings rose by 1.8 per cent in April to June 2018 when compared
with the respective period in 2017. The growth amounted to 1.9 per
cent in the private sector, to 1.6 per cent in the central
government sector, and to 1.3 per cent in the local government
sector.

The indices of wage and salary earnings and the indices for
regular earnings are final as far as the year 2017. They are based
on the realised earnings development. The indices for 2018 are
preliminary and they are based on estimates of agreement effects
and the wage drift.

According to preliminary data, earnings of wage and salary
earners were 2.0 percent higher in July to September than in the
year before

According to Statistics Finland’s preliminary data, the
nominal earnings of wage and salary earners are 2.0 per cent higher
in July to September 2018 than in July to September 2017. According
to preliminary data, the index of wage and salary earnings 2015=100
for the third quarter of 2018 is 103.2. Statistics Finland compiles
the preliminary third quarter data for the index of wage and salary
earnings on the basis of the Employees Pensions Act (2006/395).

Effects of the Competitiveness Pact visible in earnings
development

On the Government's initiative, labour market organisations
concluded in summer 2016 the Competitiveness Pact, which aimed to
improve the competitiveness of Finnish enterprises and create new
jobs. In the Competitiveness Pact, labour market organisations
agreed on reducing public sector holiday bonuses, extending annual
working time and extending collective agreements. The sections
below examine how the effects of the Competitiveness Pact are
visible in the development of the index of wage and salary earnings
and the index for regular earnings.

Cut in public sector holiday bonuses has an effect on the index
of wage and salary earnings

It was agreed in the Competitiveness Pact that public sector
holiday bonuses would be reduced by 30 per cent in the years 2017
to 2019. The figure examines the development of the index of wage
and salary earnings (ATI) and the index for regular earnings (SANI)
in 2015 to 2018. The examination ends in the last published
quarter, that is, the second quarter of 2018. In the
Competitiveness Pact, the cut in public sector holiday bonuses is
visible in the central and local government sectors, in both of
which the index of wage and salary earnings fell in the first
quarter of 2017 and the earnings development was negative in 2017.
A corresponding fall is not visible in the index for regular
earnings because it does not take into account performance-based
bonuses and non-recurring items included in collective agreements.
Cuts in holiday bonuses are considered non-recurring items based on
collective agreements so they are included in the index of wage and
salary earnings but not in the index for regular earnings.

Development of the index of wage and salary
earnings and the index for regular earnings 2015=100 by employer
sector

The cut in public sector holiday bonuses is also visible in
earnings development by industry. The figure below shows the
development of the index of wage and salary earnings 2005=100 in
the industries of manufacturing, trade, public administration and
health and social work in 2005 to 2017. The examination ends in
2017 because the data of the index of wage and salary earnings are
final as far as that year. The majority of public sector wage and
salary earners are employed in the industries of public
administration and health and social work. In these industries, the
index of wage and salary earnings falls in the first quarter of
2017 and the earnings development was negative in 2017. A
corresponding fall did not appear in manufacturing and trade, for
instance.

Development of the index of wage and salary
earnings 2005=100 by industry (TOL2008)

Effect of extended working time is eliminated in the index of
wage and salary earnings and the index for regular earnings

In the Competitiveness Pact, labour market organisations agreed
on extending working time by 24 hours per year without changing the
earnings level. The extension of working time was mainly
implemented during 2017 in those fields that have joined the Pact.
Their coverage is good 90 per cent of wage and salary earners. In
some, particularly smaller enterprises the extension was not
implemented although the enterprise is in a field belonging to the
scope of the Pact.

The extension of working time agreed in the Competitiveness Pact
has thus had a negative effect on hourly earnings, but it has not
had an effect on monthly earnings. The index of wage and salary
earnings and the index for regular earnings measure earnings for
regular hours on the monthly level. In principle, the extension of
working time is thus not visible in these indices. The earnings
development of hourly-paid employees is, however, measured from
hourly earnings, so the effect of the Competitiveness Pact is taken
into account in the calculation of the indices. Correction
coefficients have been calculated in some fields with collective
agreements to the index series so that the extension of working
time would not cause a negative effect on the indices of these
fields. In some fields with collective agreements, the
Competitiveness Pact has been implemented so that it has not
affected the earnings for regular working hours, on which the
calculation is based, but the changes caused by the Pact have been
taken to irregularly paid bonuses. In some fields with collective
agreements, there have been different alternatives for implementing
the Competitiveness Pact, whereby its effect on hourly earnings
cannot be accurately estimated. This has caused uncertainty in the
calculation of earnings development in some fields between 2016 and
2017.

No collectively bargained pay increments in practice in
2017

In the Competitiveness Pact it was also agreed to extend
collective agreements by 12 months so that wages and salaries
remain unchanged for the duration of the extended agreement period.
As a result, collectively bargained pay increments occurred only in
individual industries in 2017.

The figure below examines the development of the index of
negotiated wages and salaries 2010=100 in 2010 to 2018. Employer
sectors total, private sector and local government sector were
selected to the examination. The index of negotiated wages and
salaries in the private sector remained unchanged in 2017 and
turned upwards again in the first quarter of 2018, when
collectively bargained pay increments have come into force. In the
local government sector, the index of negotiated wages and salaries
falls in the first quarter of 2017, because the reduction in public
sector holiday bonuses is also visible in the development of the
index of negotiated wages and salaries. In 2017, the index of
negotiated wages and salaries in the local government sector
remains unchanged and turns upwards in the second quarter of 2018,
because the first overall increase in the collective agreement
period was made in May 2018. In the central government sector, the
development of the index of negotiated wages and salaries has in
recent years largely followed the development of the index of
negotiated wages and salaries in the local government sector.

Development of the index of negotiated wages and
salaries 2010=100 by employer sector

Change in occupational structure affects the development of
average earnings

Statistics Finland has since 2013 published the index
standardised with the main category of occupation based on the data
of the index for regular earnings, where the shares of the main
categories of occupation for each wage and salary earner group are
standardised based on the wage and salary sum weights of 2010.
There are ten of these main categories of occupation, from managers
to other workers. By comparing the index standardised with
occupation and the index for regular earnings, we can examine how
changes in the occupational structure of the employer sector
influence the development of average earnings in the same employer
sector.

From 2010 to 2017, the change in the occupational structure has
accelerated the rise in average earnings both in the central and
local government sectors. The figure shows how the index for
regular earnings has risen more in the central and local government
sectors in 2010 to 2017 than the index standardised with
occupation. The development is opposite in the private sector, that
is, the index standardised with occupation has risen more than the
index for regular earnings in 2010 to 2017.

Change in earnings by employer sector and
according to the index for regular earnings and the index
standardised with the main category of occupation 2010=100

For example, in the occupational groups of professionals and
managers, wage and salary earners usually have a higher university
degree, and in these occupations the earnings level is also higher
than average. The growth in the share of managers and professionals
leads to a faster rise in average earnings. This is particularly
visible in the earnings development of the central and local
government sectors. In the private sector, the index standardised
for occupation has risen in 2010 to 2017 more than the index for
regular earnings, but in 2016 to 2017, for example, the index for
regular earnings has risen more than the index standardised for
occupation. At the same time, the share of professionals has grown
in the private sector.

The employer sector-specific data of the index standardised with
the main category of occupation can be found in the
database table of the statistics on the index of wage and
salary earnings (Index of regular earnings 2010=100 standardised
with the main category of occupation).